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Business group prevalence and impact across countries and over time: what can we learn from the literature

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  • Carney, Michael
  • Van Essen, Marc
  • Estrin, Saul
  • Shapiro, Daniel

Abstract

The business groups (BGs) literature has previously focused on the financial performance of its affiliates, relative to non-affiliated firms in the same country. However, when we consider the main predictions of the two theoretical perspectives on BGs, the institutional voids (IV) and entrenchment/exploitation view (EE), both rely to a significant extent on propositions about BG prevalence. Yet, surprisingly, there are almost no empirical studies that explore levels, impacts and time paths of prevalence. In this study, we therefore focus on BG prevalence both across countries and over time. We build a unique database by extracting estimates of BG prevalence for multiple countries between 1978 and 2012 from the existing literature, and use this to test conflicting predictions derived from the IV and EE perspectives respectively. We find no consistent evidence that BG prevalence diminishes over time with economic development, as institutional voids diminish, which is predicted by the IV perspective. Instead, the long term persistence of BGs in many countries appears to be more consistent with the EE perspective. However, we also find no support for the view that high levels of BG prevalence are negatively associated with country-level indicators and determinants of economic development and competitiveness, as suggested by that perspective. We conclude that there is no robust support for either the IV or the EE view and highlight the need for more contextualised theorizing about the evolution of BGs.

Suggested Citation

  • Carney, Michael & Van Essen, Marc & Estrin, Saul & Shapiro, Daniel, 2017. "Business group prevalence and impact across countries and over time: what can we learn from the literature," LSE Research Online Documents on Economics 68281, London School of Economics and Political Science, LSE Library.
  • Handle: RePEc:ehl:lserod:68281
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    References listed on IDEAS

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    Cited by:

    1. Wu, Lichao & Wei, Yingqi & Wang, Chengang, 2021. "Disentangling the effects of business groups in the innovation-export relationship," Research Policy, Elsevier, vol. 50(1).
    2. Yadong Luo & Huan Zhang & Juan Bu, 2019. "Developed country MNEs investing in developing economies: Progress and prospect," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 50(4), pages 633-667, June.
    3. Carney, Michael & Shapiro, Daniel & Estrin, Saul & Liang, Zhixiang, 2018. "National institutional systems, foreign ownership and firm performance: the case of understudied countries," LSE Research Online Documents on Economics 87042, London School of Economics and Political Science, LSE Library.
    4. Luomaranta, Henri & Cantu, Fernando & MacFeely, Steve & Peltola, Anu, 2020. "The role of multinational and trading enterprises in the gender pay gap: Evidence from Finland," Conference papers 333136, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    5. Aguilera, Ruth V. & Crespí-Cladera, Rafel & Infantes, Paula M. & Pascual-Fuster, Bartolomé, 2020. "Business groups and internationalization: Effective identification and future agenda," Journal of World Business, Elsevier, vol. 55(4).
    6. Anaïs HAMELIN & Vivien LEFEBVRE & Laurent WEILL, 2020. "In Business Groups We Trust," Working Papers of LaRGE Research Center 2020-06, Laboratoire de Recherche en Gestion et Economie (LaRGE), Université de Strasbourg.
    7. Shi, Xinwei & Sutherland, Dylan & Williams, Christopher & Rong, Ke, 2021. "Chinese MNE acquisition of unrelated foreign businesses: The role of diversified business group affiliation, private ownership and strategic asset seeking," Journal of Business Research, Elsevier, vol. 129(C), pages 145-156.
    8. Henri Luomarant & Fernando Cantu & Steve MacFeely & Anu Peltola, . "The role of multinational and trading enterprises in employment and the gender pay gap: evidence from Finland," UNCTAD Transnational Corporations Journal, United Nations Conference on Trade and Development.

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    More about this item

    Keywords

    business group prevalence; foreign direct investment; institutional voids; entrenchment; economic development; country competitiveness;
    All these keywords.

    JEL classification:

    • N0 - Economic History - - General
    • R14 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Land Use Patterns
    • J01 - Labor and Demographic Economics - - General - - - Labor Economics: General

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